The change to British law, part of the Small Business, Enterprise and Employment Act of 2015, came about in response to increasing international concern in recent years about tax evasion, money laundering, and other illegal activities on the part of companies.
The change is designed to prevent the creation of the shell companies that foster such activities. The law will affect all companies incorporated under the Companies Act.
Who Counts As Having “Significant Control”?
According to the bill, a person can be deemed to have “significant control” in a company if he or she:
- Holds 25% or more of the company’s shares or controls 25% or more of company voting rights
- Is entitled to appoint more than half of the members of the board of directors
- Is otherwise able to exercise ‘significant influence or control’ over the company
Previous law required companies to list only official holders of the company shares in a separate registry.
Things to Keep in Mind
If you believe your company will be affected by this, you should consider getting a head start. For companies with a complex ownership structure, figuring out who does and doesn’t need to be listed as having “significant control” may be a complicated and time-consuming process. Under the law, all persons with significant control need to be registered by April 2016.
Companies will also need to update the registry annually, and most of the information contained in the registry will be available to the public. Non-compliance with the law could result in criminal charges for both the company and its managers.
Experts are predicting that concerns about the privacy of company owners mean that this provision will result in major changes to company management structures. The fact that the law includes a provision that protects the full birth date of persons with significant control (PSCs), has not gone a long way to assuage public concern.
But even with the new requirements, there are ways to ensure the privacy of your shareholders, though they need to be weighed carefully against possible tax consequences. Be sure to talk with your legal counsel to decide the best approach to dealing with the new measures.
Other Provisions of the Act
The mandate to register PSCs is far and away the most controversial part of the Act, but the new law also includes some other minor provisions. For example, companies will have the option of keeping their own books on owners, managers, PSCs, etc., or having them kept at a central registry.
Finally, in a move also intended to increase transparency, the law does away with corporate directors, artificial legal “persons” listed as the director of a company.
Beginning in October 2015, UK companies will no longer be allowed to appoint corporate directors. All directors of the company will need to be natural persons, and current corporate directors will lose their status one year after implementation of this provision.
Harry Price is a freelance writer and painter, who lives on the south coast with his wife and 3 cocker spaniels. He loves running and is always in training for his next marathon. His dogs double as his training buddies.